Correlation Between Xero and Altium

Can any of the company-specific risk be diversified away by investing in both Xero and Altium at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Xero and Altium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xero Limited and Altium Limited, you can compare the effects of market volatilities on Xero and Altium and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Xero with a short position of Altium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xero and Altium.

Diversification Opportunities for Xero and Altium

0.39

Correlation Coefficient

Xero  Altium

Weak diversification

The 3 months correlation between Xero and Altium is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Xero Limited and Altium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altium Limited and Xero is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Xero Limited are associated (or correlated) with Altium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altium Limited has no effect on the direction of Xero i.e., Xero and Altium go up and down completely randomly.

Pair Corralation between Xero and Altium

If you would invest  10,605  in Xero Limited on October 26, 2024 and sell it today you would earn a total of  320.00  from holding Xero Limited or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.56%
Values	Daily Returns

Xero Limited  vs.  Altium Limited

Xero Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xero Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Xero reported solid returns over the last few months and may actually be approaching a breakup point.

Altium Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altium Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Altium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xero and Altium

The main advantage of trading using opposite Xero and Altium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xero position performs unexpectedly, Altium can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Altium will offset losses from the drop in Altium's long position.

The idea behind Xero Limited and Altium Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.